6 comments:

This chart tells only one story based on fact. It shows the transition of the U.S. economy from a labor to a knowledge based economy, and the premium being paid for that ability to acquire the skills needed to excel in a knowledge based economy. What would make this a more insightful chart is if you ranked percentile of income by year based on highest level of eduction attained. Then, you would get a better understanding of what the biggest driver is of this. Would it explain all of it? Nope, but I bet if you did a regression analysis it would explain about 90% of it.

Mitch:Your hypothesis sounds appealing and it would be convincing if you could provide some research that would show this notion to be true. However, although I am extremely far removed from being an expert on these matters, it appears that there are not a lot of studies available to substantiate your claim. Here are some interesting comments made in a few research journals I was able to find.

Education and Income Distribution:Gregorio & Leehttp://www.trabajoyequidad.cl/documentos/temp/jdeg-ineq_1999_2002.pdf

“The other issue is how education and income distribution have evolved in each country over time. While we showed that income distribution across countries is clearly accounted for by differences in education, we have found that the variation of income distribution for each country over time is not clearly explained by education and income factors alone. This is because actual changes in education and income within countries were quite large over the decades, while changes in income inequality were relatively small over time. Therefore, while our results may help to understand better why countriesshow persistent differences in income distribution, the stability of income distribution over time must be explained by other factors. This is exactly what our simulations show: the interplay between income, education and its distribution does not produce significant changes over time.”

“This paper provides empirical evidence on how education and income have related to income distribution in a panel data set of a broad range of countries for a period from 1960 to 1990. We have also analyzed the effects of social expenditure. The findings indicate that education factors – higher attainment and more equal distribution of education - play some role in changing income distribution…However, we should emphasize that a significant proportion of cross-country and over-time variations of income inequality still remain unexplained. Simulation exercises show that the expansion of income and education alone cannot make income inequality decline substantially in a short period”“The small quantitative effects of educational expansion on income distribution are due in part to the impact of educational expansion on the inequality of educational attainment in the population. Therefore, a policy to expand education needs to focus closely on the inequality of education if the aim is to reduce income inequality.”

There is another study by Lim & Tang that has some interesting conclusions with regard to Income distribution and Education.http://www.uq.edu.au/economics/mrg/0506.pdf

I think that some other factors to consider would be:

• Disproportionate migration of income to Wall Street from other sectors of the economy. A comparison of Wall Street compensation as compared to other industries has been skewed tremendously over the last 3 decades.• Consider the case of the unemployed Engineer—his career farmed out to an overseas operation.• The transition of a production economy to a service economy where minimum wage is a significant segment of labour costs..

Your point may have substantial merit but even if you are correct this does very little to formulate a solution to the crisis that is forming due to the polarization of –the destruction of the middle class at the hands of the corporate elite and sycophantic politicians.

Mitch:Your hypothesis sounds appealing and it would be convincing if you could provide some research that would show this notion to be true. However, although I am extremely far removed from being an expert on these matters, it appears that there are not a lot of studies available to substantiate your claim. Here are some interesting comments made in a few research journals I was able to find.

Education and Income Distribution:Gregorio & Leehttp://www.trabajoyequidad.cl/documentos/temp/jdeg-ineq_1999_2002.pdf

“The other issue is how education and income distribution have evolved in each country over time. While we showed that income distribution across countries is clearly accounted for by differences in education, we have found that the variation of income distribution for each country over time is not clearly explained by education and income factors alone. This is because actual changes in education and income within countries were quite large over the decades, while changes in income inequality were relatively small over time. Therefore, while our results may help to understand better why countriesshow persistent differences in income distribution, the stability of income distribution over time must be explained by other factors. This is exactly what our simulations show: the interplay between income, education and its distribution does not produce significant changes over time.”

“This paper provides empirical evidence on how education and income have related to income distribution in a panel data set of a broad range of countries for a period from 1960 to 1990. We have also analyzed the effects of social expenditure. The findings indicate that education factors – higher attainment and more equal distribution of education - play some role in changing income distribution…However, we should emphasize that a significant proportion of cross-country and over-time variations of income inequality still remain unexplained. Simulation exercises show that the expansion of income and education alone cannot make income inequality decline substantially in a short period”“The small quantitative effects of educational expansion on income distribution are due in part to the impact of educational expansion on the inequality of educational attainment in the population. Therefore, a policy to expand education needs to focus closely on the inequality of education if the aim is to reduce income inequality.”

There is another study by Lim & Tang that has some interesting conclusions with regard to Income distribution and Education.http://www.uq.edu.au/economics/mrg/0506.pdf

• Disproportionate migration of income to Wall Street from other sectors of the economy. A comparison of Wall Street compensation as compared to other industries has been skewed tremendously over the last 3 decades.• Consider the case of the unemployed Engineer—his career farmed out to an overseas operation.• The transition of a production economy to a service economy where minimum wage is a significant segment of labour costs..

Your point may have substantial merit but even if you are correct this does very little to formulate a solution to the crisis that is forming due to the polarization of –the destruction of the middle class at the hands of the corporate elite and sycophantic politicians.

Education and Income Distribution:Gregorio & Leehttp://www.trabajoyequidad.cl/documentos/temp/jdeg-ineq_1999_2002.pdf

“The other issue is how education and income distribution have evolved in each country over time. While we showed that income distribution across countries is clearly accounted for by differences in education, we have found that the variation of income distribution for each country over time is not clearly explained by education and income factors alone. This is because actual changes in education and income within countries were quite large over the decades, while changes in income inequality were relatively small over time. Therefore, while our results may help to understand better why countriesshow persistent differences in income distribution, the stability of income distribution over time must be explained by other factors. This is exactly what our simulations show: the interplay between income, education and its distribution does not produce significant changes over time.”

“This paper provides empirical evidence on how education and income have related to income distribution in a panel data set of a broad range of countries for a period from 1960 to 1990. We have also analyzed the effects of social expenditure. The findings indicate that education factors – higher attainment and more equal distribution of education - play some role in changing income distribution…However, we should emphasize that a significant proportion of cross-country and over-time variations of income inequality still remain unexplained. Simulation exercises show that the expansion of income and education alone cannot make income inequality decline substantially in a short period”“The small quantitative effects of educational expansion on income distribution are due in part to the impact of educational expansion on the inequality of educational attainment in the population. Therefore, a policy to expand education needs to focus closely on the inequality of education if the aim is to reduce income inequality.”

There is another study by Lim & Tang that has some interesting conclusions with regard to Income distribution and Education.http://www.uq.edu.au/economics/mrg/0506.pdf

Mitch:Your hypothesis sounds appealing and it would be convincing if you could provide some research that would show this notion to be true. However, although I am extremely far removed from being an expert on these matters, it appears that there are not a lot of studies available to substantiate your claim. Here are some interesting comments made in a few research journals I was able to find